Bryan Caplan wonders whether economic theory is on the decline. Here are some signs I have noticed:

  1. Econometrica, the most theory-oriented of the top 4 journals has a well-publicized mission to publish more applied, general interest articles, and this is indeed happening.  This comes at the expense of pure theory as well as theoretical econometrics.
  2. The new PhD market was, on the whole, difficult for theorists this year.  Strong candidates from Yale, Stanford, NYU and Princeton were placed much lower than expectations, some without a job offer in North America as of yet.  As far as I can tell, there will be only two junior theorists hired at top 5 departments.

But there are many positive signs too

  1. Theorists have been recruiting targets for high-profile private sector jobs.  Michael Schwarz and Preston McAfee at Yahoo!, Susan Athey at Microsoft for example.  In addition the research departments in these places are full of theorists-on-leave.
  2. Despite some overall weakness, theory is and always has been well represented at the top of the junior market.  This year Alex Wolitzky, as pure a theorist as there is, is the clear superstar of the market.  Here is the list of invitees to the Review of Economics Studies Tour from previous years.  This is generally considered to be an all-star team of new PhDs in each year.  Two theorists out of seven per year on average.  (No theorist last year though.)
  3. In recent years, two new theory journals, Theoretical Economics and American Economic Journal:  Microeconomics, have been adopted by the leading Academic Societies in economics.  These journals are already going strong.
  4. Market design is an essentially brand new field and one of the most important contributions of economics in recent years.  It is dominated by theorists.

In my opinion there are some signs of change but, correctly interpreted, these are mostly for the better.  Decision theory, always the most esoteric of subfields has moved to the forefront as a second wave of behavioral economics.  Macroeconomics today is more heavily thoery-oriented than ever.  Theorists (and theory journals) are drawn away from pure theory and toward applied theory not because pure theory has diminished in any absolute sense, but rather because applied theory has become more important than ever.

Professor Caplan offers some related observations in his commentary:

…mathematicians masquerading as economists were never big at GMU, and it’s hard to see how they could do well in the blogosphere either.

I am sure he is not talking about Sandeep and me because we are just as bad at math as all of the other bloggers who pretend to be economists.  But just in case he is, I invite him to take a look around.  Finally,

My econjobrumors insider tells me that its countless trolls are largely frustrated theorists who feel cheated of the respect they think the profession owes them.  Speculation, yes, but speculation born of years of study of their not-so-silent screams.

He is talking about the people who anonymously post sometimes hilarious, sometimes obnoxious vitriol on that outpost of grad student angst known as EJMR. I wonder how he could possibly know the research area of anonymous posters to that web site? Among all the economists who feel cheated out of the respect that they think the profession owes them why would it be that theorists are the most likely to troll?